The Stigler Center is hosting a first-of-its-kind, three-day conference in Chicago that focuses on this very question, bringing together dozens of top academics,  policymakers, journalists, and public intellectuals. This is our live coverage of its first day. 

Does America have a concentration problem? This week, the Stigler Center is hosting a first-of-its-kind conference in Chicago that focuses on this very question.

The conference brings together dozens of top academics from law, economics, history, and political science, along with policymakers, journalists, and public intellectuals.

Catch up on our live blog from the conference’s first day: 

Monday, 18:05PM 

That is it for the first day of the conference. Join us tomorrow at 8:30AM, Central Time.

Monday, 18:00PM

MIT professor Nancy Rose presses Rahman on his call for broadening antitrust tools to include public utility regulation and notes two main failures of public utility regulation when it comes to technology: AT&T and railroads. Rahman answers: “Just because there are cases where it didn’t work doesn’t mean you throw out the idea of public utility regulation. Net neutrality is an attempt to update the idea of public utility, the notion that there are limits to what antitrust can do. You want certain forms of prophylactic regulation, because there are limits to what regulators can do on a case-by-case basis.”

Monday, 17:20 PM 

Justin Pierce, an economist at the Federal Reserve Board of Governors, discusses his paper on mergers and the economy (written with Bruce Blonigen), which finds no evidence that mergers increase efficiency, but does find evidence that mergers increase market power, allowing companies to generate higher profits by raising prices.

K. Sabeel Rahman says antitrust should be broadened to include other tools, such as public utility regulation. Concentration, he says, “warps the structure of opportunity in our economy.”

Monday, 17:00PM 

Peter Orszag discusses differences between firms as a driver of inequality. “What firm you’re at matters a lot,” he says.

Simcha Barkai, author of a much-discussed paper on the decline in the labor share, echoes this sentiment: “Different workers have different incomes.”

Monday, 16:46

Lina Khan begins by discussing the shifts U.S. antitrust enforcement has gone through in the last three decades, saying: “We’re living in a world that reflects how antitrust has been done in a particular way for the last 30 years. Our current political economy reflects a particular way of doing antitrust.”

Khan continues to discuss her paper on inequality and antitrust (written with Sandeep Vaheesan) which showed how in some areas, like health care, concentration has contributed to hikes in prices. Overall, she says, the relationship between inequality and concentration has been understudied for decades, “which shows the way in which law and legal doctrine shape research agendas.”

Khan adds that “just because concentration has regressive effects doesn’t mean that antitrust should be used to remedy this.”

Monday, 16:38PM

Matt Stoller: “‘Too big to fail’ is the first popular phrase that had antitrust connotations since the 1930s.”

Monday, 16:36PM

Concentration, Market Power, and Inequality: An examination of the interactions between concentration, market power, and inequality.

Moderator: Matt Stoller, New America

  • Simcha Barkai, PhD Candidate, University of Chicago Booth School of Business
  • German Gutierrez, NYU Stern School of Business
  • Lina Khan, Fellow, Open Markets, New America
  • Peter Orszag, Vice Chairman and Managing Director, Lazard Freres & Co LLC
  • Justin Pierce, Senior Economist, Board of Governors of the Federal Reserve
  • Sabeel Rahman, Assistant Professor of Law, Brooklyn Law School

Monday, 16:20PM

F.M. Scherer: “Louis Brandeis said that ‘Sunlight is said to be the best of disinfectants; electric light the most efficient policeman.’ That was also the policy of Teddy Roosevelt. By publicizing what was going on in the industry, sunlight institutions informed public attitudes. I find it disappointing that in recent years, the sunlight function of antitrust agencies has been done away with. I hear that in the Federal Trade Commission, the main sunlight institution, they got so busy with merger enforcement they have no time to do any industry studies.”

Monday, 16:10PM 

Carl Shapiro tells participants of the history panel: “It seems like federal antimonopoly laws have been an abject failure.” 

Monday, 16:05 PM

Richard R. John: “If you insist that antitrust is just about consumer welfare, how can you possibly have recourse against platforms like Google and Facebook, which are ostensibly free?”

Monday, 16:00PM

Monday, 15:50PM

Monday, 15:30PM 

Gerald Berk talks about Louis Brandeis, his contributions to antitrust and antimonopoly in the U.S, and his dual role as both a committed advocate for the political, civic liberty rationale of antitrust and as the first to inject scientific management and efficiency into the debate on antitrust in the United States. Brandeis was “committed to this deep idea that it’s not merely the case that concentrated economic power undermines liberty—the freedom of all of us to do what we want—but that concentrations of economic power undermine civic personality by making power unassailable,” says Berk.

University of Chicago economist Sam Peltzman talks about the history of the Chicago School. “There are two Chicago schools” in regards to concentration and antitrust, he says. One was the “hawkish” Chicago School, represented by Henry Simons, and the second was the “dovish” school made famous by Robert Bork and others.

Monday, 15:10

Columbia historian Richard R. John, the first panelist-speaker, begins by saying that antimonopoly has been a “cherished economic ideal since the founding of the Republic.”

John goes on to discuss the Telegraph Act of 1866, which according to him was representative of the “dominant 19th century response to concentration,” Jay Gould and the Western Union Telegraph Company, and the original intentions and context of the 1890 Sherman Antitrust Act. “Few historians, if any, who examined the history of the act share Robert Bork’s conviction that its original intent can be found in the determination to maximize consumer welfare,” he says. “Consumer welfare is not what the Antitrust Act was about.”

Monday, 14:50PM

Our second panel is kicking off. Watch live here.

What Does History Tell Us? The Development of Antitrust in America: A discussion on antitrust enforcement over the past 125 years, focusing on market power, political power, and efficiency as criteria for antitrust enforcement.

Moderator: Gary Reback, Carr & Ferrell LLP

  • Gerald Berk, Professor, University of Oregon, Author of Brandeis and the Making of Regulated Competition (Cambridge)
  • Richard John, Professor of History and Communications, Columbia Journalism School, Columbia University
  • Sam Peltzman, Ralph and Dorothy Keller Distinguished Service Professor Emeritus of Economics, University of Chicago Booth School of Business
  • F.M. Scherer, Professor of Public Policy and Corporate Management, Harvard Kennedy School

Monday, 14:20PM

Monday, 14:10PM

In response to questions from the audience on mergers and concentration in the tech sector, Fiona Scott Morton says that “if we decide that mergers in which a large firm buys a firm with a small number of employees are dangerous, we really have to change the laws.”

Lynn calls for policy makers to challenge mergers in tech and cite a historical precedent: “120 years ago, we didn’t talk about the dangers of railroad companies buying this grain elevator or that company. What we did is we prevented the network monopolies of that era from buying all companies. We’ve got to prevent Google and Facebook from vertically integrating.”

Shapiro says antitrust “should be moderately tighter than we are now” in some areas, but adds that “data on efficiencies of horizontal mergers is very thin.” He also says that “if the government didn’t have the burden of proof, and the companies had to prove a merger is pro-competitive, mergers would be a lot harder to do.”

Roni Michaely says U.S. may need an increase in antitrust, “not just for mergers.” “Mega companies may have to share their data, or maybe even broken up like AT&T,” he says.

Monday, 13:50PM

The next speaker, Barry C. Lynn of New America, focuses on the history of antimonopoly in America. “From the very first, antimonopoly was one of the key tools we in the U.S. used to keep ourselves free,” he says.

Lynn stresses the “philosophical revolution” that has changed antitrust regime 35 years ago and the shift in antitrust to promote efficiency. “Today, it’s absolutely clear to anyone with eyes in their head that what we did 35 years ago is not working for the average citizens.”

Monday, 13:50PM

The next speaker is Berkeley economist Carl Shapiro, who strikes a skeptical note regarding the data and studies that show that concentration has risen throughout the U.S. economy and that this has adverse economic effects. “I am picky about what counts as a market,” he says. “What did the Council of Economic Advisers do? They looked at 50-firm concentration ratio in two-digit industries. I don’t know any Industrial Organization economist who thinks that’s very informative regarding market power. At some broad level, larger firms are having a bigger share of economic activity, I think that’s true, but that doesn’t directly tell us about competition.”

He later adds that: “I think we’ve got two different worldviews: the antitrust economists, we shrug our shoulders. But maybe politicians, policymakers think that’s a problem. Is it a problem because of market power or because of political power, or because these broad concentrations are going to lead to more market power? who’s right on this? Somebody is missing something. But the data everyone is looking at, the Economic Census data, you have to be very careful with that.”

“Antitrust economists are mistaken to shrug their shoulders at increases in CR4 if CR4<50 and in HHI if HHI<1500. On the other hand, the press, politicians and some policy makers are mistaken to claim the data show a worrisome increases in industrial concentration in America,” says Shapiro. 

Corporate profits, he says, are “more of a puzzle”: “Roughly speaking, over 30 years corporate profits before tax have gone up 50 percent. How persistent are high profits at the firm and industry levels, and have entry and expansion become less effective at eliminating rents to incumbents?”

Monday, 13:30

Fiona Scott Morton stresses the role of regulation and regulatory capture in the increase of concentration in the U.S. “Behind every rule we have a lot more dollars today than we had 30 years ago and we’re not increasing the size, capability, or cleverness of the bureaucracy in proportion to that. The result is that it’s worth spending on regulation, and you get regulatory capture. Firms lobby, and convince, and take people out to lunch and hire them later in order to get regulations that protect them from competition.”

Monday, 13:20PM

Cornell’s Roni Michaely, the next speaker, is surprising attendees by talking about concentration in the pizza delivery industry.

In his talk, Michaely exhibits figures that show the widespread increase in concentration. “[The rise in concentration] is much more widespread than the 10 percent figure that was mentioned before,” he says.

Concentration, Michaely says, has increased significantly in most U.S. industries over the past 20 years. Among the consequences of this increase in concentration are increases in profitability and profit margins and a decline in the number of publicly traded firms. “U.S. markets lost over 50 percent of their public traded firms,” said Michaely, who added that “we see a three-fold increase in the average and median size of (publicly traded) firms in real terms. If markets are contestable, we should not see something like this.”

The internet, said Michaely, was thought to democratize trade, but even there, the same trend applies: “the more concentrated the industry, the more the members of this industry are accumulating patents and value of patents.”

Even in low-tech industries like pizza deliveries, he said, the rise in concentration has led to barriers to entry, as mom and pop shops find themselves unable to compete with giants like Domino’s and Pizza Hut.

Monday, 13:15PM

John Kwoka, the first speaker-panelist, says it is the “totality of evidence, rather than any single study” that underscores the rise in concentration in America. “There’s really an absence of evidence to the contrary,” he says. “I’ve yet to see a single study that shows a decline in concentration over this period of time.” 

Having said that, he notes, the studies “do not find that concentration has risen everywhere.” The industries where concentration has risen most dramatically are only a fraction of the U.S. economy, says Kwoka, “representing perhaps 10 percent of the economy. But it’s an important 10 percent.” 

It is possible, Kwoka says, that one of the reasons for rise in concentration are improvements in efficiency or service quality, or that innovation and consumer preferences have made certain sectors more concentrated, “and there are certainly sectors where that’s true.” That said, he adds, “the other reason for rising concentration is entry issues. There’s considerable evidence that the rates of new business formation have declined in this country. If new entries have diminished, but exit rates have remained more or less constance—and that appears to be the fact—then we would expect a decline in companies in a variety of such industries, and I believe the evidence supports that as well.”

The effects of this rise in concentration, says Kwoka, “have to do with aggregations of profit that exceed historic levels in this country, a lot of it due to rents, as opposed to typical profits from innovation.”

Why has concentration risen? Kwoka offers a number of reasons. First, “traditional economic reasons,” such as network effects and winner-take-all-markets. There are also “strategic” reasons: “the ability of companies to build and enhance barriers to entry has grown, and there is evidence that companies have focused on this, as opposed to traditional price raising opportunities, and considerable evidence that they are much more successful in doing this.”

Kwoka goes on to describe a third reason: policy considerations. “There has been a “documented narrowing of focus among merger enforcement agencies. Data shows that for industries where there are 5-8 firms remaining after a merger,  challenges at that level have virtually disappeared, up until you get to 3-4 remaining companies, which gives rise to broad increase in concentration.”

“A number of studies I’ve compiled and synthesized show that even after review by the agencies, mergers have resulted in price increases. That too underscores the fact that policy has been too permissive,” Kwoka adds. 

Monday, 13:00PM

The first panel has begun. You can watch it live streamed here.

Moderator Patrick Foulis begins with an anecdote: “On the way here I took an Uber to the airport. On the way, I used an iPhone, which has a 40 percent market share of smartphones in the U.S. I took a United flight, which is part of four airlines which some have called a cartel in the U.S. On the flight, I watched DirecTV, which is a media company that was bought by AT&T a couple of years ago. I checked into an InterContinental hotel, which is part of an industry that’s consolidating rapidly.

But to get a sense of the ambiguity, one can think of the same set of incidences in a slightly different light: Uber got its market share by losing a couple of billion dollars a year, essentially subsidizing people like me. Apple is part of an industry where traditionally the leader—Nokia, Motorola, BlackBerry—only last a few years. United is part of industry that investors are worried is about to have a price war. DirecTV, investors worry, is an old technology that Netflix will blow apart. InterContinental is threatened by the likes of Airbnb and internet travel aggregators. So it’s not a simple question to answer, and that is why we have assembled a panel of worldwide experts.”

Its title: What Do the Data Tell Us? Trends in Concentration and Competition: Are the rallying cries coming from the White House and mainstream media really borne out by the facts?

The participants:

  • Moderator: Patrick Foulis, The Economist
  • John Kwoka, Neal F. Finnegan Distinguished Professor, Northeastern University
  • Barry Lynn, Director, Open Markets, New America Foundation
  • Roni Michaely, Rudd Family Professor of Management, Professor of Finance, Cornell University
  • Fiona Scott Morton, Theodore Nierenberg Professor of Economics, Yale University
  • Carl Shapiro, Transamerica Professor of Business Strategy, Haas School of Business, University of California at Berkeley

Monday, 11:00AM:

Does America have a concentration problem? In the past two years, the debate over concentration, market power, and bigness—and their potential effects on the U.S. economy—has increased. Both Hillary Clinton and Donald Trump promised to pursue more active antitrust policies during the run-up to the election, and both Democrats and Republicans were critical of the merger betwee
n AT&T and Time Warner. For the first time in decades, antitrust and antimonopoly sentiments had returned to American political discourse.

At the same time, economists, policymakers, and journalists have been increasingly concerned about a growing body of research that points to a potential decline in competition in most American industries.

ProMarket has covered much of this research, reviewing papers that studied the effects of consolidation in the wireless industry, in the airline sector, in finance, online platforms, health care, and the labor market. In the past year, some economists have linked increasing concentration to some of America’s biggest economic and political problems, such as the rise in inequality, prices, and rents.

In 2016, President Obama’s Council of Economic Advisers argued that anti-competitive behavior has led to inferior or overpriced products, wage stagnation, and entrepreneurs and small businesses being “squeezed out” by bigger competitors.

To many, however, the answer to the question “does America have a concentration problem?” is still inconclusive. Some economists, such as George Mason University professor and former FTC commissioner Joshua Wright, have disputed the data that points to a rise in market concentration, and argued that a high level of concentration does not necessarily mean a decline in competition or in quality. 

Starting today, the Stigler Center at the University of Chicago Booth School of Business is hosting a first-of-its-kind, three-day conference in Chicago that will focus on the question of concentration in the American economy. The conference will bring together dozens of top academics from law, economics, history, and political science, policymakers, journalists, and public intellectuals. Margrethe Vestager, the European Commissioner for Competition, will give a video address. 

The conference, organized by Professors Luigi Zingales and Guy Rolnik from the University of Chicago Booth School of Business, will revolve around seven main themes:

  • What do the data tell us? Trends in concentration and competition.
  • What does history tell us? The development of antitrust in America.
  • Consolidation in the financial industry and its influence on antitrust.
  • Winner-take-all digital platforms and big data.
  • Information in the age of concentration.
  • Concentration, market power, and inequality.
  • Is there a role for political antitrust?

By looking at the issue from multidisciplinary perspectives, the conference will seek answers to some burning questions regarding concentration, competition, antitrust, and finance and how they evolve in the digital world. For instance, do the facts really support the prevalent narrative about the anti-competitive effects of rising concentration? Present-day challenges, such as inequality and the collection of consumer data by online platforms, will also be debated, as will the role of media and its ability to hold powerful actors to account in an era of dwindling financial resources for news media companies and the dramatic increase in the size and power of corporations, particularly digital giants.

The role of antitrust, and the question of whether it should restrain the political power of big business and special interest groups, will be examined from both historical and present-day perspectives, along with the interactions between market power, political power, and efficiency.

A full program of the conference, along with more information, can be found here.

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